How ISPs Might Argue Against ‘Net Neutrality’ in Court

March 25, 2015 Updated: March 25, 2015

Before the Federal Communications Commission (FCC) voted to reclassify Internet service providers (ISPs) as common carriers in February, the companies had promised to challenge such a decision in court. True to their words, now they’re suing the FCC.

On Monday, USTelecom—an industry group that represents Verizon, AT&T, and other ISPs—filed for the Open Internet Order to be reviewed in a District of Columbia court. Alamo Broadband, based in Texas, filed a separate suit against the FCC in a New Orleans court.

“The focus of our legal appeal will be on the FCC’s decision to reclassify broadband Internet access service as a public utility service after a decade of amazing innovation and investment under the FCC’s previous light-touch approach,” said USTelecom Senior Vice President Jon Banks. “As our industry has said many times, we do not block or throttle traffic and FCC rules prohibiting blocking or throttling will not be the focus of our appeal.”

The legal conflicts ahead have often been billed as a test of whether “net neutrality” might survive, but the ISPs themselves have gradually warmed up to the idea.

“We supported, and testified in favor of, [FCC] Chairman Genachowski’s 2010 net neutrality regulations,” AT&T executive Jim Cicconi wrote on the company blog after the FCC vote. “We thought the approach being taken by Chairman Wheeler in exploring a Section 706 regulatory framework was reasonable, and legally sustainable, as well.  We have never argued there should be no regulation in this area, simply that there should be smart regulation.”

Instead, the debate has shifted to just how broad the FCC’s powers are. If the reclassification is upheld in court, the FCC would not only have the power to ban Web-traffic throttling and paid prioritization, but also the authority to tax ISPs and dictate their rates under “just and reasonable” standards, which the current FCC chair has promised not to do.

Market Power

In a filing with the FCC, AT&T gave a preview of the legal arguments that could be deployed to undermine the FCC’s reclassification of ISPs. The FCC is not merely instituting “net neutrality” rules on ISPs, but also regulating them as common carriers, which operates under a specific definition that ISPs argue does not apply to them.

The FCC order has often been labeled as the regulation of ISPs as “public utilities,” which are monopoly services that are often subject to price control. One of the requisites for such regulations, AT&T argues, is that the service must, in fact, have some form of monopoly power, citing a precedent in a case between the FCC and Southwestern Bell from the 1990s.

AT&T maintains that broadband companies don’t have sufficient market power to warrant being regulated as common carriers, proffering the growth of Internet speed and selection across the country in the past three years as evidence of competition.

“Only 34 percent of households were located in census tracts where three or more providers offer service at 6 Mbps downstream and 1.5 Mbps upstream or faster,” the filing states. “As of December 2013—just one year later—nearly twice that percentage of households (65 percent) were located in census tracts where three or more providers offer service at 10 Mbps downstream and 1.5 Mbps upstream or faster.”

However, the case that broadband competition does exist could be undermined by a redefinition of broadband Internet to exclude a majority of cable Internet services. In late January, the FCC redefined broadband Internet as services that provide at least 25 Mbps downstream and 3 Mbps downstream.